Final answer:
The statement that a favorable efficiency variance will be credited when writing off immaterial variable overhead variances is true. Option C.
Step-by-step explanation:
When variances are considered immaterial in managerial accounting, it typically indicates that the differences between the actual costs and the budgeted or standard costs are not significant enough to warrant specific management attention or a detailed analysis to amend business processes or prices.
As a result, these variances are often closed out to a financial statement account. In the case of variable overhead variances, the question pertains to how the journal entry is made to write off these accounts.
The correct answer is that a favorable efficiency variance will be credited. A favorable variance indicates that the actual costs were less than the standard costs. As a result, the variance account has a debit balance, and it will be credited to eliminate this balance.
The debit part of the journal entry often varies, but it typically includes accounts like Cost of Goods Sold or Manufacturing Overhead, depending on the company's accounting policies and where the variance was initially recorded.
In practice, if the Cost of Goods Sold (COGS) account is debited as part of the entry, it will lower the COGS, reflecting the fact that production was more efficient than expected. Nonetheless, each situation should be evaluated based on specific company policies and industry practices.
So Option C is correct.